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No coverage for legal fees incurred without insurer's consent

A Missouri intermediate appellate court has held that an attorney was not entitled to coverage under a claims-made legal malpractice policy for legal fees he voluntarily incurred in responding to a bar complaint. Kearns v. Interlex Ins. Co., 2007 WL 2421394 (Mo. Ct. App. Aug. 28, 2007).

One of the attorney's former clients filed a bar complaint against him. Without notifying the insurer or obtaining the insurer's consent, the attorney retained counsel to represent him regarding the bar complaint. The attorney subsequently replaced his counsel, again without seeking the insurer's permission. When the attorney finally notified his insurer, the insurer denied coverage on several grounds, including breach of the policy's cooperation clause. After the bar complaint was resolved through a six-month diversion agreement, the attorney filed suit against the insurer seeking to recover his legal fees.

The court held that the legal fees the attorney incurred in responding to the bar complaint were not damages, as defined by the policy, because they did not constitute a "settlement, a monetary judgment or an award based upon or resulting from a claim for wrongful acts by the Insured." The legal fees did not constitute covered defense costs, which the policy defined as "fees and expenses charged by a lawyer, mediator or arbitrator retained by the Company or approved in writing by the Company to defend a covered claim," because the insurer did not retain the attorney's lawyers and did not give its written approval for their retention. The court also held that the attorney's breach of the policy's cooperation clause, which provided that "[t]he Insured shall not, except at the Insured's own expense, voluntarily make any payment, assume any obligation or incur any expense," negated coverage for the legal fees.

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